From my time spent in the financial industry, I understand that one of the financial concerns that tops the list of parents of young children is saving for college. According to www.savingforcollege.com, if your child is currently 4 years old and you have hopes of he/she attending a 4 year college programs, the cost in 14 years could be over $200,000! This accounts for inflation, average annual tuition increases of 6% and time.
So what steps should you be taking as a parent? What options or financial aid will be available to your children? What should you be doing NOW while your child is young to prepare for the future?
There are many options available to parents to begin the process of saving for college, here are a few popular options:
- 529 plans – a 529 is a special kind of account that allows families to put money aside for college. The government gives these accounts special tax treatment to encourage saving. Companies like Oppenheimer Funds, American Funds or Fidelity offer plans.
- 529 plan – State Sponsored – Every state also has a 529 plan. You can research the state to see what company runs the plan, what investment options are available and what restrictions if any are named for the spending of the funds.
- Coverdell ESA – this account similar to some IRAs allows you to make non-deductible contributions and grow tax-free. The main difference is that funds can also be used to pay for other qualified education expenses such as elementary and secondary school expenses.
- Detailed Estate or Insurance Planning – In working with a financial advisor, there may be ways to make your dollars do ‘double duty’ Experts can help you to utilize all difference types of accounts or vehicles to maximize the money you have.
So now that you know the options, what do you do with them? My suggestion is not to take on all the research yourself. Between tax changes, investment options and the ever-changing price of college there is so much to learn. Just as you would do if you have a health problem, I suggest you do for your financial concerns…educate yourself AND find an EXPERT!
to educate yourself – there is a great website to start to learn about options relevant to your and your child’s situation. www.savingforcollege.com
to find an expert – for a financial concern of such importance, you want to work with a trusted advisor. Out of the many options available from the Schwab’s to the Merrill Lynch’s how do you know who to call? A great place to get started is to check the credentials of local advisors.
You can check their employment record and any complaints by going to the Financial Industry Regulatory Authority (FINRA) website: http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/index.htm
You can also check to see that they are keeping themselves current of topics such as estate and tax planning, college savings or retirement by asking for their qualifications. Some qualifications to look for that are board regulated and require continuing education include:
- The CFP or Certified Financial Planner. You can find one here http://www.cfp.net/search/
- The CPA or Certified Public Accountant. http://www.aicpa.org/
- The ChFC or Chartered Financial Consultant
Many companies have coupons or gift certificates that grandparents can use to make investments as a gift for birthdays and holidays. This should be the top item on your wish lists. The kids will grow and interests may wain on some of the toys however and education is forever!!
While college may seem years away, taking a few small steps now could make all the difference in the years to come.
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